Ivanhoe Energy (TSX:IE), one of the companies backed by mining financier Robert Friedland, may become the first B.C. casualty of a drastic slump in oil prices. The company has filed for creditor protection and faces possible bankruptcy.
Ivahnoe, which is headquartered in Vancouver, has been suspended from trading on the Toronto Stock Exchange and its listing is now under review. EY has been appointed trustee as the company attempts a restructuring.
Asked if the recent drop in oil prices is related to the company’s financial troubles, Bill Trenaman, Ivanhoe’s vice president of investor relations, said “I would say that that’s a fair assumption.”
Ivanhoe has been trying to develop heavy-to-light oil upgrading projects in Alberta, Ecuador and Mongolia.
But it recently announced it was scaling back its operations in Ecuador “in response to significantly lower oil prices and a delay in discussions with the company’s partner.”
And in an October 2014 management discussion and analysis, Ivanhoe recorded a $93 million write-down on its Tamarack project in the Alberta oil sands, for a net loss of $115 million in the nine months ending September 30, 2014.
The company has defaulted on its interest payments on $73 million worth of debentures.
Earlier this week, the Bank of New York Mellon, called in its debt after Ivanhoe failed to pay interest $2.1 million in interest payments on its debentures as of December 31.
Friendland, who also founded Ivanhoe Mines Ltd. (TSX:IVN), is listed as a major shareholder in Ivanhoe Energy, holding 17.46% of the company’s shares in 2014.
Ivanhoe said it will try to recapitalize, but warns that if it can’t raise the capital to restructure, it could go bankrupt.
“There can be no assurance that the current process will result in a transaction or, if a transaction is undertaken, that it will be successfully concluded in a timely manner or at all,” the company said in a press release.
“Failure by the company to achieve its financing and restructuring goals through an approved proposal would result in the company becoming bankrupt.”